tag:theconversation.com,2011:/institutions/china-europe-international-business-school-2103/articlesChina Europe International Business School2019-02-06T11:42:59Ztag:theconversation.com,2011:article/1109572019-02-06T11:42:59Z2019-02-06T11:42:59ZAutocracies that look like democracies are a threat across the globe<figure><img src="https://images.theconversation.com/files/256887/original/file-20190201-103164-to7fhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A rally celebrating the second anniversary of Russia's annexation of Crimea, March 18, 2016. </span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Russia-Crimea/d572a67ffa844324a14d389cbbaa6ac5/27/0">AP/Ivan Sekretarev</a></span></figcaption></figure><p><a href="https://www.nytimes.com/interactive/2018/09/20/us/politics/russia-interference-election-trump-clinton.html">Russia’s successful interference</a> in the 2016 U.S. presidential election may inspire other countries to do the same. </p>
<p>These other countries don’t look threatening. They look like democracies. But they’re not. </p>
<p>They’re a special kind of autocratic regime that masquerades as a democracy. And what looks like benevolent conduct by these countries can quickly change into aggressive, politically charged behavior. </p>
<p>Autocracies, often known as “authoritarian regimes,” maintain power through centralized control over information and resources. Political opposition is either forbidden or strongly curtailed and individual freedom is limited by the state.</p>
<p>Autocracies that look like democracies are different because their leaders permit political opponents to run for election – even though they rarely win.</p>
<p>These countries’ capitalist systems have some of the trappings of liberal democracies in the West. But these regimes use capitalism to further their authoritarian rule.</p>
<p>These so-called “dominant party authoritarian regimes” have surged in number from around 13 percent of all countries before the end of the Cold War to around <a href="https://doi.org/10.1017/9781108186797">33 percent today</a>. </p>
<p>Most are located in Africa, the Middle East and Asia. They are also present in Eastern Europe and in the Americas. Russia is one of them; so are Turkey, Malaysia, Singapore and Venezuela. </p>
<p>These regimes often engage in the same kinds of bad behavior as other autocracies. But their behavior is critically different in both the motivations and methods used to further authoritarian ends, as detailed in my new book “<a href="https://doi.org/10.1017/9781108186797">Authoritarian Capitalism</a>.”</p>
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<a href="https://images.theconversation.com/files/256890/original/file-20190201-108334-dhuupg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/256890/original/file-20190201-108334-dhuupg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/256890/original/file-20190201-108334-dhuupg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/256890/original/file-20190201-108334-dhuupg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/256890/original/file-20190201-108334-dhuupg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/256890/original/file-20190201-108334-dhuupg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/256890/original/file-20190201-108334-dhuupg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/256890/original/file-20190201-108334-dhuupg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Russian military intelligence service building; 12 of its officers hacked into the Clinton presidential campaign.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Russia-US-Trump-Probe/39c1c0cf812c4522b3152d7b348c664d/1/0">AP/Pavel Golovkin</a></span>
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<h2>Political control</h2>
<p>Part of the danger with dominant party authoritarian regimes is that their veneer of democracy permits political opponents to run for election. But when incumbent rulers face a threat to their power, the autocrats often respond by targeting political dissidents and taking aggressive actions toward foreign enemies to bolster popular support.</p>
<p>For example, Russian leader Vladimir Putin faced an unprecedented challenge from <a href="https://en.wikipedia.org/wiki/2011%E2%80%932013_Russian_protests">citizen protests during the 2012 presidential election</a>. The protests continued into 2013.</p>
<p>Putin punished the protesters. New York Times correspondent <a href="https://www.nytimes.com/2013/01/06/world/europe/in-russia-a-trendy-activism-against-putin-loses-its-moment.html">Ellen Barry reported in 2013</a> that “new laws prescribe draconian punishments for acts of dissent. … Mr. Putin … embraced a new, sharply conservative rhetoric, dismissing the urban protesters as traitors and blasphemers, enemies of Russia.”</p>
<p>Shortly afterward, Russia’s foreign activities became even more <a href="https://www.banking.senate.gov/imo/media/doc/McFaul%20Testimony%209-6-18.pdf">belligerent than during the Soviet period</a>. This accomplished just what Putin wanted: Following his annexation of Crimea in 2014, his approval ratings <a href="https://www.washingtonpost.com/news/worldviews/wp/2015/06/24/putins-approval-ratings-hit-89-percent-the-highest-theyve-ever-been/?utm_term=.cdbd4c686102">skyrocketed</a>. </p>
<p>Another recent example is Turkish leader Recep Tayyip Erdogan’s repression of <a href="https://www.theguardian.com/world/2016/nov/05/erdogan-cumhuriyet-turkey-journalists-arrested-detained-dissent">domestic political dissidents</a> following the failed July 2016 coup against him. According to The Guardian, the regime arrested or suspended “more than 110,000 officials, including judges, teachers, police and civil servants.”</p>
<p>Erdogan went after foreign-based dissidents too, allegedly orchestrating a plot to kidnap opposition leader <a href="https://www.newsweek.com/mueller-investigating-michael-flynn-plot-kidnap-turkish-opposition-leader-708053">Fetullah Gulen</a> from Pennsylvania.</p>
<p>And while he won the presidential election in June 2018, Erdogan’s foreign-based critics remain concerned about his threats. <a href="https://www.nytimes.com/2019/01/09/sports/kanter-knicks-erdogan-turkey.html">Enes Kanter</a>, a Turkish NBA star, declined to travel to London in January 2019 out of fear that Turkish spies might kill him.</p>
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<a href="https://images.theconversation.com/files/256888/original/file-20190201-127151-199bf61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/256888/original/file-20190201-127151-199bf61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/256888/original/file-20190201-127151-199bf61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=808&fit=crop&dpr=1 600w, https://images.theconversation.com/files/256888/original/file-20190201-127151-199bf61.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=808&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/256888/original/file-20190201-127151-199bf61.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=808&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/256888/original/file-20190201-127151-199bf61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1016&fit=crop&dpr=1 754w, https://images.theconversation.com/files/256888/original/file-20190201-127151-199bf61.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1016&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/256888/original/file-20190201-127151-199bf61.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1016&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Turkish NBA star Enes Kanter curtails foreign travel for fear of kidnapping by the Turkish government.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Mavericks-Knicks-Basketball/627009ce8b004df39b8c836df302337b/10/0">AP/Kathy Willens</a></span>
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<h2>Information control</h2>
<p>Another distinction that characterizes dominant party authoritarian regimes is how they exploit Western legal and financial systems against Western media outlets critical of the regime.</p>
<p>Normally, <a href="http://oxfordre.com/politics/view/10.1093/acrefore/9780190228637.001.0001/acrefore-9780190228637-e-3">autocrats control information and resources</a> to retain power. But rather than relying on the typical autocrat’s crude hostile attacks or outright censorship, dominant party authoritarian regimes use legal or financial methods regarded as legitimate by the West.</p>
<p>In other words, they sue the media or they buy them.</p>
<p>A slew of foreign news organizations – including <a href="http://www.nytimes.com/2010/03/24/opinion/global/24iht-opednote.html">The New York Times</a>, <a href="http://www.wsj.com/articles/SB122791989311765753">Wall Street Journal</a>, <a href="http://www.nytimes.com/2010/04/04/opinion/04pubed.html">Bloomberg</a> and <a href="http://www.nytimes.com/2010/04/04/opinion/04pubed.html">The Economist</a> – were sued by the Lee family, autocratic rulers of Singapore, for political and financial reporting after the 2008 global financial crisis. </p>
<p>The family maintained the coverage defamed them. As the Wall Street Journal’s <a href="https://www.wsj.com/articles/SB122791989311765753">editors wrote in 2008</a>, “We know of no foreign publication that has ever won in a Singapore court of law. Virtually every Western publication that circulates in the city-state has faced a lawsuit, or the threat of one.”</p>
<p>Malaysian political authorities deployed similar tactics when their rulers felt threatened.</p>
<p>Following the Asian financial crisis of 1997, and in the months leading up to the November 1999 general election, wealthy ruling party supporters in Malaysia filed a flurry of <a href="http://www.ipsnews.net/1999/05/rights-malaysia-on-a-media-suing-spree/">defamation lawsuits</a> against foreign journalists and media organizations, such as the Asian Wall Street Journal and Dow Jones.</p>
<p>Russia’s means of pressuring foreign media are slightly different, but they also involve taking advantage of Western legal-financial systems.</p>
<p>Russia has engaged in <a href="https://www.csis.org/analysis/kremlin-playbook">disinformation campaigns</a> that exploit weaknesses in the West’s freedom of speech protections, as documented by experts at the Center for Strategic and International Studies and at the Center for the Study of Democracy. </p>
<p>And Russian companies have acquired sufficiently large <a href="https://www.csis.org/analysis/kremlin-playbook">ownership stakes</a> in foreign media companies to influence their operations. </p>
<p>This has involved both the manipulation of their coverage and a reduction in media freedoms of the country in which they are located. </p>
<p>For example, <a href="https://www.csis.org/analysis/kremlin-playbook">Delyan Peevski</a> is a controversial member of the Bulgarian Parliament who advocated for pro-Russian policies. Peevski built and sustained a media empire that controls around 40 percent of Bulgaria’s print sector and 80 percent of the newspaper distribution with loans from a partially Russian-owned bank.</p>
<h2>Resource control</h2>
<p>In contrast to firms located in other types of autocracies, state-controlled businesses in dominant party authoritarian regimes often comply with international financial regulations. This helps them gain access to Western countries’ corporate and financial systems.</p>
<p>Under cover of legitimate business operations, their autocratic leaders can pursue political objectives with less scrutiny. </p>
<p>Malaysia’s state-owned investment fund, <a href="https://www.theguardian.com/world/1mdb">1MDB</a>, engaged in <a href="http://www.theedgemarkets.com/article/why-malaysians-should-be-worried-about-1mdb%E2%80%99s-debts">aggressive investment tactics</a> with corrupt practices – including “abnormally high payback” for investment bankers – that extended across the globe. </p>
<p>The U.S. accuses former Prime Minister Najib Razak’s <a href="https://www.theguardian.com/world/2016/jul/28/1mdb-inside-story-worlds-biggest-financial-scandal-malaysia">family friend</a> of masterminding the theft of US$2 billion from the fund. And its capital was also <a href="https://www.cnbc.com/2015/12/28/wsj-reports-malaysia-pm-najib-razak-used-700m-donation-to-win-2013-elections.html">channeled to politicians and projects</a> to help the ruling party win the 2013 elections.</p>
<p>Russia has also used <a href="https://www.csis.org/analysis/kremlin-playbook">state-linked companies</a> to gain influence over Hungary, Serbia and Bulgaria’s crucial energy sectors via purchases of ownership stakes in listed companies.</p>
<p>This granted the Russian state access to other key sectors of these economies, such as finance and telecommunications. <a href="https://www.csis.org/analysis/kremlin-playbook">Russia then was able to influence government policies</a>. </p>
<p>In one case, the Serbian government <a href="https://www.ft.com/content/ac12dd62-c881-11e7-ab18-7a9fb7d6163e">chose not to enforce the European Union’s sanctions against Russia</a>. That was a risk for Serbia, because it has wanted to qualify for European Union membership by 2025.</p>
<p>Even bolder actions occurred with Russia’s interference in the U.S. 2016 presidential election.</p>
<p>Michael McFaul, the former U.S. ambassador to Russia, told the Senate in September 2018 that never before had the Kremlin violated American sovereignty so <a href="https://www.banking.senate.gov/imo/media/doc/McFaul%20Testimony%209-6-18.pdf">“illegally, aggressively and audaciously”</a> – even during the high-stakes rivalry of the Cold War.</p>
<p>It is now common knowledge that <a href="https://www.justice.gov/opa/pr/grand-jury-indicts-thirteen-russian-individuals-and-three-russian-companies-scheme-interfere">Russian-controlled agencies and businesses</a> played a strategically vital role in the election interference.</p>
<h2>Resisting influence</h2>
<p>Can democracies defend themselves against such aggressive regimes?</p>
<p>The “<a href="https://www.csis.org/analysis/kremlin-playbook">Kremlin Playbook</a>,” written by Heather A. Conley, James Mina, Ruslan Stefanov and Martin Vladimirov, is an extensive study of Russian influence in Hungary, Slovakia, Bulgaria, Latvia and Serbia. It provides a detailed list of policy recommendations to resist Russian influence that can be applied to other dominant party authoritarian regimes.</p>
<p>They include strengthening intelligence gathering and cooperation between the U.S. and its allies; increasing U.S. and allied governments’ assistance to vulnerable countries; and stronger protections for and enforcement of transparency measures.</p>
<p>But I believe an important addition to this list is the need to monitor the strength of the ruling party’s hold on power. That’s because aggressive, politically charged activities are most likely to occur when incumbent rulers face an elevated threat. </p>
<p>With its attack on the U.S. 2016 election, Russia showed that it’s possible to interfere destructively in the most powerful Western democracy. I expect that other autocracies that look like democracies will follow suit – across the globe.</p><img src="https://counter.theconversation.com/content/110957/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Carney does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Almost one-third of countries around the world are authoritarian regimes with the trappings of democracy. Their bad behavior poses a threat to real democracies, as the United States recently learned.Richard Carney, Professor, China Europe International Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/644152016-09-16T00:09:21Z2016-09-16T00:09:21ZWhen globalisation meets entrepreneurship it can be a force for good<figure><img src="https://images.theconversation.com/files/137511/original/image-20160913-19251-8gew8n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Globalisation facilitates technology entrepreneurship</span> <span class="attribution"><span class="source">Image sourced from shutterstock.com</span></span></figcaption></figure><p>Entrepreneurship, the pursuit of opportunities despite lacking the necessary resources at the outset, is often celebrated as a hero of the global economy. </p>
<p><a href="https://theconversation.com/au/topics/globalisation-backlash-29119">Globalisation</a>, on the other hand, is often criticised as a villain contributing to rising inequality. </p>
<p>The contrast between the two was highlighted recently in two opposing posts on The Huffington Post. One bears the headline “<a href="http://www.huffingtonpost.com/rep-scott-peters/entrepreneurs-engines-of-_b_6180284.html">Entrepreneurs: Engines of our Economic Growth</a>” and the other, “<a href="http://www.huffingtonpost.com/rep-scott-peters/entrepreneurs-engines-of-_b_6180284.html">Globalization is Killing the Global: Return to Local Economies</a>”. </p>
<p>Republican presidential nominee Donald Trump arguably appeals to people enamoured by entrepreneurial success and disenchanted by globalisation. But such thinking overlooks what globalisation makes possible – or at least expands the scope for. </p>
<p>Globalisation works hand in hand with entrepreneurship in three important ways. </p>
<p>First, globalisation facilitates technology entrepreneurship by fostering the rise of innovation ecosystems. This might include engagement between new ventures, and large multinational enterprises.</p>
<p>After a decade of studying partnerships between multinationals and new ventures, one of my most vivid memories is of sitting outside the Staples Center in Los Angeles with a small group of technology entrepreneurs from around the world. They beamed with pride as their ventures’ logos flashed on a large neon sign, courtesy of Microsoft, whose worldwide partner conference was underway there. These ventures had been handpicked by Microsoft to be showcased at this event through a global partnering initiative for innovative startups. </p>
<p>Nowadays, many multinationals have managers with job titles that include terms like “startup engagement”. They compete to win the hearts, minds and ideas of new ventures – which benefit from globalisation by gaining powerful partners.</p>
<p>Second, globalisation facilitates transnational entrepreneurship. Diaspora networks of émigrés to various countries take what they have learnt in corporations and use it to create their own businesses in the same or similar sectors. </p>
<p>In some cases, such as the Israeli and Indian technologist diasporas, these ethnic communities support technology entrepreneurship. In others transnational ventures are decidedly low-tech. A fascinating example is the large merchant community from the city of Wenzhou in China’s Zhejiang Province. </p>
<p>The people of Wenzhou have a reputation for being among China’s most successful entrepreneurs, particularly in manufacturing. This track record has been continued by the large network of Wenzhou natives who have gone abroad, especially those in continental Europe. </p>
<p>Apparel businesses in Italian cities such as Prato run by entrepreneurs from Wenzhou appropriate the legitimacy of “made in Italy” garments and the cost advantages associated with employing workers from Wenzhou. While local competitors are not always pleased, this can be a useful mode of value creation with benefits for the local economy, as long as local laws are respected.</p>
<p>Third, globalisation facilitates social entrepreneurship. This involves creating wealth while simultaneously addressing vexing societal problems such as environmental degradation, poverty and poor health.</p>
<p>There are many unique opportunities for shared value creation when both for-profit multinationals and non-profits such as NGOs and the United Nations work with entrepreneurs. To illustrate, the United Nations Children’s Fund (UNICEF) launched a competition in Accra, Ghana seeking to attract ideas for “game-changing” solutions tackling challenges that children face. The eight selected social entrepreneurs, including one who is developing an app to teach children to read, are now working in an incubator managed by a partner-NGO.</p>
<p>Does this mean that globalisation is an unmitigated force for good? No, but it would be foolish to overlook the potential globalisation has for good – via entrepreneurship. </p>
<p>As some Wharton students recently conveyed to Donald Trump in an <a href="https://medium.com/@whartonopenletter/you-do-not-represent-us-an-open-letter-to-donald-trump-94cf73ce11d8#.h63ik49zl">open letter</a>: “diversity and tolerance have been repeatedly proven to be valuable assets to any organization’s performance”.</p><img src="https://counter.theconversation.com/content/64415/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shameen Prashantham does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Globalisation still has the potential to deliver good – via entrepreneurship.Shameen Prashantham, Associate Professor of International Business and Strategy, China Europe International Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/582152016-06-09T00:34:59Z2016-06-09T00:34:59ZCorporate venture capital can pay, but only if you get the structure right<figure><img src="https://images.theconversation.com/files/120458/original/image-20160428-30976-tpyytq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Large firms are setting up venture capital funds to help silo good ideas.</span> <span class="attribution"><span class="source">Image sourced from Shutterstock.com</span></span></figcaption></figure><p>Large established firms increasingly rely on external sources for innovation. One way these firms are seeking to foster innovative activity is via corporate venture capital programs. </p>
<p>According to the National Venture Capital Association (NVCA), established firms invested more than US$4 billion in venture businesses in 2014, representing more than 10% of all venture capital investments in the US during the year.</p>
<p>There’s a variety of different corporate venture capital structures and practices, reflecting in part the diverse objectives of corporate investors, which often go beyond financial returns. For instance, companies like IBM and Cisco have used their venture capital programs to scout for possible M&A opportunities. </p>
<p>Established firms also use them to supplement internal R&D departments, exposing them to new technologies and ideas that complement future product development efforts. For others, venture capital programs can be a way to engage with and monitor new, disruptive products or technologies that could potentially pose a threat to their existing businesses.</p>
<p>The dual objectives of corporate venture capital programs – strategic and financial – offer more structuring options than are needed for independent venture firms. If you are thinking about starting a venture capital program at your company, it’s important to choose a structure that will align with your firm’s priorities.</p>
<p>We recently completed a <a href="https://www.researchgate.net/publication/284278650_Creating_Values_through_Corporate_Venture_Capital_Programs_The_Choice_between_Internal_and_External_Fund_Structures">research study</a> exploring the trade-offs between setting up a corporate venture capital program internally vs. externally, as an independent unit outside the firm. We also looked at how different organisational and legal structures impact personnel policies and investment practices, which can ultimately facilitate corporate objectives.</p>
<p>Based on what we learned from our in-depth interviews with investors and investees in the US, Europe and Asia, here are some of the key things firms should think about when establishing a venture capital program.</p>
<h2>Internal vs. external</h2>
<p>In general, internal units, where the corporations invest off their own balance sheets, are more conducive to strategic investments that support the existing core business of the corporate sponsor. However they are often slower in decision making and subject to greater fluctuation in strategic direction and resource endowments, depending on the corporate sponsor’s financial health. </p>
<p>External units can be more agile in decision making and are more nimble and autonomous for exploring investments into new business areas or innovations that are potentially disruptive to the core business. One implication of this difference is that external units may be better suited for early stage investments where relevance to the core is sometimes unclear and there is uncertainty about the strategy and direction of the startup. They also tend to attract experienced investment managers and deliver both strong financial returns and strategic benefits to the corporate sponsor.</p>
<h2>Consider strategic goals</h2>
<p>Internal units are better when near term strategic goals are clear and require strategic investments to further these interests or where the external environment is unfavourable and the need for tight control of investment activity is paramount. In such cases, strategic considerations might override financial ones. </p>
<p>On the other hand, when there is less current strategic overlap between the investor and investee, measuring the outcome of the corporate venture capital program using financial gains might be more appropriate. This is more easily done through an external unit.</p>
<h2>Leveraging synergies</h2>
<p>Focusing solely on financial objectives makes it very difficult for corporate venture capital units to compete against the more experienced internal VC firms that offer their managers greater incentives. The most successful corporate venture capital programs are those that can take advantage of the existing resources of their corporate sponsor as a key differentiator. Looking closely at opportunities for technology transfer between corporate sponsors and investees could possibly create value for both parties.</p>
<h2>Developing an ecosystem</h2>
<p>When used together with other tools (such as in-house R&D,M&As, strategic alliances), corporate venture capital programs can be excellent for developing an ecosystem. This enables the creation of proprietary partner networks or value chains, without the burden of integrating partners into the existing operations of the corporate sponsor. The sponsor can then retain influence through minority equity ownership. For example, Google, Motorola and Apple have used venture capital programs to help establish an ecosystem around their wireless and web activities.</p>
<p>The corporate venture capital model is still developing and less mature than the internal venture capital model. It took internal VC firms decades to establish their reputation and know-how in nurturing startups. </p>
<p>At the same time, an increasing number of corporate venture capital programs have moved from internal to external units in recent years, making it premature to draw definite conclusions on whether external units outperform internal ones. As new entrants typically adopt established industry norms, it will likely take many years for newly established corporate venture capital programs to determine the best organisational structure.</p>
<p><em>This article was co-authored by Paul Asel, Managing Director of Nokia Growth Partners.</em></p><img src="https://counter.theconversation.com/content/58215/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Corporations that set up venture capital funds must choose wisely between internal or external fund structures.S. Ramakrishna Velamuri, Professor of Entrepreneurship, China Europe International Business SchoolHaemin Dennis Park, Assistant Professor of Management, Drexel UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/563612016-04-13T20:17:24Z2016-04-13T20:17:24ZWhy China could never sign on to the Trans-Pacific Partnership<p><a href="http://piie.com/publications/pubs_year.cfm?ResearchTypeID=1&ResearchYear=2016">Recent</a> estimates show that most members of the Trans-Pacific Partnership will make substantial gains, unlike those who opt not to participate. </p>
<p>US annual real income is expected to increase by 0.5% of GDP while annual exports will increase by 9.1%. Exports of Japan, Vietnam and Malaysia are expected to increase by 23.2%, 30.1% and 20.1% respectively. Non-members, on the other hand, are expected to gain little. China, for example, is expected to gain only 0.2% when the agreement is concluded in 2030.</p>
<p>So was China’s decision not to join a big mistake?</p>
<p>In 2013, the 12 countries participating in the TPP accounted for about a third of China’s trade in merchandise goods. However the US stands out as it makes up about half of the TPP in terms of exports, and about a quarter when it comes to imports. This would imply that exclusion from the TPP is essentially a lost opportunity for any country trying to secure a Free Trade Agreement (FTA) with the United States.</p>
<p>Meanwhile, a look at the Trade Complementary Index (TCI) – an indicator of how well the structures of a country’s imports and exports match – shows how much could be gained by both the US and China if the latter were included in the TPP.</p>
<p>But are those opportunities enough to get past the hurdles? Since the TPP is an agreement involving both emerging and advanced economies, it has to be more complex than those between economies at the same level of development; and it has to have sufficient room for bargaining. If China had chosen to be part of the TPP, the negotiations would have been slow and perhaps would not have ended with an agreement because of the many sensitive issues involved. </p>
<p>Some of the main stumbling blocks include state-owned enterprises, transparency, labour regulation, market-based competition and investor state disputes.</p>
<h2>State-owned enterprises (SOEs)</h2>
<p>The TPP requires that no subsidies should be provided to an SOE for its international business expansion. The goal: to ensure competition between an SOE and a private enterprise takes place on a level playing field inside the host country.</p>
<p>But <a href="http://www.ft.com/intl/cms/s/0/69253d76-633c-11e5-97e9-7f0bf5e7177b.html#axzz41eH3PAlR">China’s 150,000 SOEs</a> form the bedrock of the Chinese economy and therefore have certain privileges. </p>
<p>About a thousand SOEs are listed in the Shanghai or Shenzhen Stock Exchanges, indicating they are commercial in nature. More than 150 of these are managed by the central SASAC, and the list includes some of the largest companies in the world.</p>
<p>The Chinese government assists these SOEs in various <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2354348">ways</a>, including preferential interest rates. Although there have been exceptions under the TPP (for example New Zealand was able to get exemptions for its powerful cooperative Fonterra), it would have been an uphill battle for China to negotiate exemptions for so many of its SOEs engaged in various international operations within TPP member countries.</p>
<h2>Transparency and anti-corruption</h2>
<p>The TPP commits partners to writing and enforcing anti-bribery laws. It can be argued that enforcement would have been a challenge for China. </p>
<p>In Transparency International’s Corruption Perception index, which ranks countries based on the degree of corruption in the public sector, only two TPP countries <a href="http://www.transparency.org/cpi2014">ranked</a> below China in 2014 – Vietnam and Mexico. Although one can argue that membership in the TPP could raise the bar for China’s efforts at eradicating corruption, the gap between China and important partners (the US and Japan) is significant. The TPP could have been yet another platform for critics to accuse China of lacklustre anti-corruption efforts.</p>
<h2>Labour</h2>
<p>The inclusion of labour issues in an FTA is rare since labour rights are considered “domestic issues” and interference by external parties jeopardises the sovereignty of individual members. In this regard, the TPP can be considered bold. </p>
<p>The chapter on labour would have been a contentious issue between China and the US. For example China’s labour laws, while allowing freedom of association, require all trade unions to be affiliated with the All-China Federation of Trade Unions, which is an agency of the Chinese Communist Party. The agreement, meanwhile, requires TPP partners to adopt a legal framework that upholds fundamental labour rights as recognised by the International Labour Organization.</p>
<h2>Free and open competition</h2>
<p>A common philosophy within the TPP agreement is free competition among signatories. Firms from any TPP country will be allowed to bid for government contracts in another, for example. Testing and certification awarded by an assessment body in one country should be accepted in other countries as well. </p>
<p>The chapter on competition generally calls for member countries to reach the standards practised in countries like Singapore and New Zealand, known for their ease of doing business. But in the World Bank’s Doing Business <a href="http://www.doingbusiness.org/data">rankings</a> for 2016, China was lower than all TPP partners, except Vietnam. China would have had to negotiate hard to get exemptions for its SOEs and SMEs from these open competition clauses and chapters.</p>
<h2>Investor-State Dispute Settlement (ISDS)</h2>
<p>While it has its <a href="https://www.washingtonpost.com/blogs/monkey-cage/wp/2015/03/26/people-are-freaking-out-about-the-trans-pacific-partnerships-investor-dispute-settlement-system-why-should-you-care">critics</a>, the ISDS – a system under which an investing company can seek compensation from a host country if its property rights are violated – has been included in several FTAs recently. This is because it offers an assurance to multinational corporations that expropriation by host governments is only a remote <a href="http://aib.msu.edu/publications/insights/volume/16/issue/1">possibility</a>.</p>
<p>Over the last 15 years China has been <a href="http://www.ft.com/intl/cms/s/0/07507e0e-5e05-11e4-bc04-00144feabdc0.html#axzz41XcPJli0">signing</a> agreements containing the ISDS clause as it has been <a href="http://www.ft.com/intl/cms/s/87437290-0620-11e2-bd29-00144feabdc0,Authorised=false.html?siteedition=uk&_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F87437290-0620-11e2-bd29-00144feabdc0.html%3Fsiteedition%3Duk&_i_referer=&classification=conditional_standard&iab=barrier-app#axzz42ldHahRe">effective</a> in protecting the country’s investments abroad. However the World Justice <a href="http://worldjusticeproject.org/publication/rule-law-index-reports/rule-law-index-2015-report">Project</a>, which ranks countries on the rule of law – and regulatory enforcement in particular – shows that China fares miserably when compared with other TPP countries. Only Mexico is marginally below it.</p>
<p>It’s very likely the ISDS would have been a heated issue for China, and it is possible that like Australia, Mexico, Peru and Vietnam, China would have fought for many exemptions.</p>
<h2>Opportunity cost limited, for now</h2>
<p>China’s other international initiatives, as well as its sheer size, reduce the losses of being a TPP outsider. But it has lost an opportunity to commit to an improvement in the general trading and investment climate and drive new impetus to its dwindling export sector. </p>
<p>The agreement offers member countries a road map and a schedule to reform the business environment and make it more competitive. Countries with similar capabilities, like Japan and South Korea on the higher end and Vietnam on the lower end, will be able to divert some trade away from China. It is therefore important for China to build up its productivity to ensure it is able to compete with TPP members for market share.</p>
<p>China has also lost an opportunity to sign an FTA with the US, but following a specified TPP schedule would be seen as the US dictating the reforms in China. And the US is hardly likely to penalise China given its importance to world trade.</p>
<p>China has always reformed using its own timetable. For a country that is establishing its legitimacy as a global economic power, it has to write its own future. The rules of the TPP may not fit the current state of the Chinese economy. China has to mould a domestic economy that is large enough to withstand any global economic slowdown. To create that domestic economy, certain features of the “old” economy may still be required.-</p><img src="https://counter.theconversation.com/content/56361/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bala Ramasamy does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>To create a resilient domestic economy, certain features of the “old” economy may still be required in China.Bala Ramasamy, Professor of Economics, China Europe International Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/445122015-07-14T20:20:43Z2015-07-14T20:20:43ZCompany chiefs with daughters make for kinder workplaces<figure><img src="https://images.theconversation.com/files/88024/original/image-20150710-16796-ywn8g2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Having a daughter impacts the way CEOs run their companies.</span> <span class="attribution"><span class="source">Ted Kerwin/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Why do some of America’s largest corporations spend an extra US$59.5 million a year on corporate social responsibility? New research suggests it’s because they’re run by chief executive officers with daughters. </p>
<p>Our <a href="http://ssrn.com/abstract=2618358">research</a>, shows that where the main decision maker has a female child, the company is generally much nicer to employees, and there are positive spin-off effects for the wider society as well. </p>
<p>Previous research has shown that there’s some element of truth to the tale told in the film <a href="http://www.imdb.com/title/tt1323594/">Despicable Me</a>, where the villain is transformed from being “super bad” to “super dad” after he has to father three little girls. </p>
<p>We already know that <a href="http://scholar.harvard.edu/msen/publications/identifying-Judicial-Empathy-Does-Having-Daughters-Cause-Judges-Rule-Womens-Issues">judges with daughters tend to vote more liberally</a>. So too are <a href="http://www.motherjones.com/kevin-drum/2013/03/members-congress-daughters-vote-better-womens-issues">congressmen with daughters</a>, especially when it comes to reproductive rights issues. </p>
<p>This is the first time, though, that the effect on the behaviour of CEOs of large US corporations has been examined. We looked at the decisions made by almost 400 CEOs (including 3.7% women) who, between them, have a total of almost 1,000 children. We found that having a daughter also impacts the way CEOs run their companies. The effect is even greater if the daughter is the CEO’s first-born.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/88023/original/image-20150710-16784-xpi6m3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/88023/original/image-20150710-16784-xpi6m3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=322&fit=crop&dpr=1 600w, https://images.theconversation.com/files/88023/original/image-20150710-16784-xpi6m3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=322&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/88023/original/image-20150710-16784-xpi6m3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=322&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/88023/original/image-20150710-16784-xpi6m3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=404&fit=crop&dpr=1 754w, https://images.theconversation.com/files/88023/original/image-20150710-16784-xpi6m3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=404&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/88023/original/image-20150710-16784-xpi6m3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=404&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">From super bad to super dad.</span>
<span class="attribution"><span class="source">Universal Pictures International/AAP</span></span>
</figcaption>
</figure>
<p>The most significant impact has to do with corporate social responsibility (CSR) issues related to diversity, which previous research has shown includes everything from whether companies provide childcare and flexi-time, to their reluctance to lay off staff, and their penchant for sharing profit with employees. It also covers how women, minorities and/or the disabled are treated. We found that, in general, these groups tend to fare better at firms with CEOs who have daughters. </p>
<p>Interestingly enough, having a son doesn’t have the same results mentioned above. And firms that change from a CEO who has a daughter to one who doesn’t see a noticeable fall-off in these types of CSR-related initiatives. On the other hand, hiring a new CEO who has a daughter leads to increased CSR-related activity. Plus if there’s a leadership change, companies that have a good CSR track record are more likely to hire CEOs with daughters. So the next time you’re weighing a company’s job offer, it may be wise to take some time to find out the gender of the CEO’s children. </p>
<p>All of the factors above – which fall into the broad category of corporate social responsibility – add up to an extra US$59.5 million per year in company spending when implemented. That’s about 13.4% of the firm’s net income. In fact, having a female child makes a male CEO almost a third more likely to make CSR decisions similar to those made by a female CEO. Overall, CEOs with daughters tend to show a stronger attachment to society at large, and concern for the well-being of stakeholders – even those who are not their shareholders.</p>
<p>Individuals can put this information to work for them. Say you’ve invented a new product that will have a huge impact on quality of life for the entire society, but the only catch is you need an angel investor. Look for a venture capital firm run by a CEO with a daughter.</p>
<p>And it goes without saying: if you’re really concerned about CSR issues, you will find kindred spirits in CEOs with daughters. That’s because the influence that comes from our family environment goes both ways. </p>
<p>Parents shape their daughters’ behaviour, and girls influence the decisions mum and dad make at work. Children shape their parents’ beliefs and preferences, and this has real implications for decision making at the top echelons of corporate America.</p><img src="https://counter.theconversation.com/content/44512/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The next time you’re weighing a company’s job offer, it may be wise to find out the gender of the CEO’s children.Henrik Cronqvist, Professor of Finance, University of MiamiFrank Yu, Associate Professor of Finance, China Europe International Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/445702015-07-13T01:56:12Z2015-07-13T01:56:12ZHow China’s bull market could bleed into its economy<p>Don’t bet more than you can afford. Don’t borrow to play. Don’t chase your losses. Quit while you’re ahead.</p>
<p>If only Chinese stock market investors had followed these basic gambling rules. Seduced by dreams of getting rich quick, millions of inexperienced Chinese investors have lately been treating China’s stock market like a casino. With the help of social media, the optimistic sentiment spread quickly, pulling more in. The index for the main board of the Shanghai Stock Exchange almost doubled in the past year. The index of small cap stocks has tripled or better. It became a classic asset bubble. Then it all came crashing down.</p>
<h2>The role of the Chinese government</h2>
<p>The government-engineered bull market was meant to help resolve China’s real estate bubble and over-leveraged local governments, incentivise innovation and facilitate reform of state-owned enterprises. Instead, it was hijacked by highly-leveraged greedy individual investors. As the government became concerned and began to deleverage margin trading, it set off a stampede, with everyone rushing to the blocked exit doors because of the 10% price limit trading rule. Over the past three weeks the market dropped by 30%. Even after this correction, many small cap stocks remained over-valued.</p>
<p>In an effort to calm the market, the government has taken measures to buoy the prices of blue chip stocks, temporarily halted IPOs and lifted insider trading rules to make it easier for company directors to buy back their own shares. It has also imposed a one year stock sale ban on anyone owning 5% or more of shares in a company. When the government began focusing support on blue chips, at least 1,439 Chinese listed companies — 50% of overall listings — applied for a temporary trading halt in order to protect themselves. This also contributed to the panic.</p>
<p>Even Chinese companies listed in other markets were affected by the crisis. The hashtag #ChinaMeltdown began to spread on international social media. US investors began selling off stocks in Chinese companies listed there even though they are not affected by the liquidity crisis in the Chinese stock market.</p>
<p>Just before the Chinese market plunged, there had been a surge in US-listed Chinese companies planning to go private hoping to chase the higher valuations in the Chinese market with an eventual Chinese IPO. Many will have to delay these plans.</p>
<h2>China’s economy at ‘new normal’</h2>
<p>The Chinese market crisis is a reflection of the over-valuation and over-leveraging of small-cap stocks, and is not comparable to what happened in the US in 1929, which reflected a fundamental crisis in the US economy. The Chinese economy has already moved to a “new normal” stage in anticipation of a slower rate of growth as it transitions from manufacturing to consumption. China’s GDP growth rate is still 7%.</p>
<p>Investors in emerging markets tend to overestimate growth which leads to overvaluation. In China 85% of investors are individuals, unlike in developed markets where they are institutions. The turnover rate of <a href="http://www.chfsdata.org/chfs.html">these Chinese investors</a> is more than 900%, the highest in the world. The account balance of 84.1% of these investors is less than 100,000 RMB, and 10.39% have a balance between 100,000 and 500,000 RMB. Only 6% have a college degree. </p>
<p>Chinese investors also understand that the priority of the government is social stability; the government will step in when anything threatens that objective. This recent bull market can also be seen as a typical example of investors hijacking this sentiment.</p>
<p>The government knows it must rebuild investor confidence or the pessimistic sentiment could spill over into the banking sector. Some insiders believe that a significant portion of the capital that was used for margin trading actually came from the asset management products that were issued by the banks. If the banking sector is impacted, then the negative sentiment could spill over to consumers’ willingness to spend, which would then impact the overall economy. There have also been reports that some entrepreneurs have speculated in the stock market using their company’s operating capital.</p>
<h2>A lesson in market risk</h2>
<p>Any stock market is built on confidence and the expected value of future cash flow. The objective of the government should be to mitigate the systemic risk rather than managing the stock index. The government is over-protecting retail investors. The function of the capital market is to charge different prices or risk premium on firms relative to their risk levels. Everyone should understand the rule of the market: higher returns mean higher risk.</p>
<p>At the end of last week, as the market realised how determined the government was to handle the problem, some experienced investors began returning in a hunt for bargain stocks. I expect the market will gradually bounce back, though with some short-term volatility because small-cap stocks are still mostly overvalued and some investors are still highly leveraged.</p>
<p>The bull market spirit is still here, but hopefully both the government and retail investors will learn a valuable lesson from this crisis. The market is designed for long-term financing, not short-term speculation. Investors should respect the power of the market.</p><img src="https://counter.theconversation.com/content/44570/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Oliver Rui does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Chinese investors are learning to respect the power of the market, but the banking sector should know better.Oliver Rui, Professor of Finance and Accounting, China Europe International Business SchoolLicensed as Creative Commons – attribution, no derivatives.